The Phoenix office market is beginning to stabilize, with vacancy declining for the first time since the pandemic. Over the past four quarters, the market recorded 1.6 million square feet of positive net absorption, driven by owner/user acquisitions of heavily vacant buildings, steady leasing activity, increased in-person office attendance, and higher renewal rates. As a result, overall vacancy has improved from 17.0 percent a year ago to 16.4 percent, making Phoenix one of the few major U.S. markets to see a year-over-year decline in office vacancy.
This stabilization is supported by very limited new supply, with just 450,000 square feet delivered over the past three years, well below pre-COVID annual averages. The development pipeline remains minimal as equity and debt partners have been reluctant to pursue speculative projects. As a result, high-end office space in prime submarkets has experienced strong demand and rent growth, while non-premium and suburban buildings continue to face challenges, reflecting a slow and uneven recovery across the broader market.
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